Investment Planning – How to create a solid investment plan?

Investment Planning is one of the important aspects of Financial Planning. The probability of achieving your financial goals depends on how well you plan your investments.

What is Investment Planning?

Investment Planning is the process of placing your monies/funds into proper investment vehicles based on your financial goals and the time frame to achieve them. How much risk you can afford to take is also an important point here.

We normally give more importance to RETURNS than goals. Example – You get a bonus of Rs 1 Lakh then the first question which may come to mind is – “ Can I get 10% returns if this 1 lakh is invested in XYZ product?”

Rather it should be ‘for which goal should I invest this Rs 1 Lakh?’

Investment Planning Process :

So, how should I plan the investments? Is there a better approach?

Identify your Financial Goals : These goals can be buying a house, planning for kid’s higher education etc., You can sort them as High, Medium and Low priority goals.

Analyze how much risk you can afford : You’re the best judge for yourself to decide on how much risk you can take on your investments. There are certain psychometric tests which can be used to measure your risk taking capacity. The risk profiles can be Aggressive, Medium and Conservative.

Identify time frame for your goals : You can divide the goals based on the duration as Short, Medium and Long term goals.

Identify financial products : Now based on the above points, identify the financial products which match your requirements.

You can maintain a simple excel sheet with details of your investment planning. You may consider the below format.

Investment planning – Important points to ponder upon :

Dynamic process – Investment planning and Financial planning is a continuous process. This is not a one time event. Your goals and economic profile may keep changing. Accordingly, accommodate your investments.

Realistic – Try to set the goal amounts in a realistic way. Consider various factors like your future income growth, job stability, savings rate etc., The goals should be attainable.

Taxation – While identifying investment products, you may check if they are tax efficient or not. But do not buy them just to save taxes. Consider buying them only if they meet your requirements. Also, find out the tax adjusted returns for each product.

Re-balancing & Re-allocation – Not only your priorities change over a period of time but also the financial market conditions. Tweak your investment portfolios as per the changing conditions.

Diversification – Identify investments across the asset classes. Spread your risk. Do not invest in one product category only.

I believe that many of us chase only the returns and unnecessarily complicate the financial lives. Do not just chase returns but chase your Goals too. Hope this post is useful. Kindly leave your comments

Sreekanth Reddy

Sreekanth is the Man behind ReLakhs.com. He is an Independent Certified Financial Planner (CFP), engaged in blogging, financial counseling & property consultancy for the last 6 years through his firm ReLakhs Financial Services . He is not associated with any Financial product / service provider.
The main aim of his blog is to "help investors take informed financial decisions."

Dear Podamj,
1 – Any specific reason or objective for maintaining Rs 30 Lakh FD? What is the FD tenure?
2 – You can take a term plan with adequate life cover and then surrender the existing policy.
Read :
How to get rid off unwanted life insurance policy?
Term insurance Vs Traditional plan.
Top Term insurance plans.
3 – Start accumulating your emergency fund. It can be around 6 to 9 times of your monthly living expenses. You may consider Short-term FDs/RDs & liquid debt funds.
Read: Best Debt mutual funds.
4 – Read : The 6 most common personal finance mistakes.
5 – Retirement planning & Kid’s Education planning should be given top priority over other goals.
Read:Kid’s education goal planning.Retirement planning goal calculator.

> The reason for 30 lakh FD was to have emergency funds. These are like for 390 days culumative types.
> From a term life insurance plan, is LIC the most recommended than the new generation ones?
> Apart from these, I have a surplus of 70k to be invested. What would be best option?

I am 37 year old,
FYI, below was my financial planning status 3 months back,
NO planning for Retirement. NO plan for my Childs education. No Contingency fund. No Term Plan, so was not insured enough . Have invested in real site (bought a plot).

Below is my Finance profile after going through most of your articles on Financial planning, Retirement planning, Insurance, Mutual funds

Hi Srikanth,
Sorry for the late reply…Thank you so much for your inputs.. Sure will try to update things as suggested…
I have made slight change. stopped SIP from ICICI direct( To avoid extra charges). Have opted for Direct plans for above mentioned.

Hi Sreekanth
I had a chat with Max bupa after sending above message. They are saying waiting period is not there for any disease in Heart beat but in Apollo few diseases are covered after 1 year and few 2 years.

Dear Mahesh,
I understand that it is very tough to identify best and suitable health insurance plan.
Suggest you to compare various plans before you take final decision.
Kindly go through my article – Best Portals to compare Health Insurance plans.

1.I am an IT employee working in an MNC and i want to save money for my retirement.Till now i have not saved anything.Last years i got married and i have decided to save money from this year onward.I have chosen below three ELSS mutual funds for long term(10-15 years) and tax saving .Could you please suggest which one i should choose and how much should i invest per month.Do i need to split among the three.

is it good to invest for 10-15 years in above funds to get decent return?

Just to inform that i have planned to save 15k per month.Please suggest what are the different long term options are available to get a decent return.Just to let you know that i have a running LIC plan which is 10K per annum.

Thank you very much for your valuable feedback on financial planning .
Can you please tell me,i have one LIC Jeevan Anand policy,plan 149 and Term 72(Commencement Date-28 Mar 2013),i have paid 11 premium(Quarterly) .But after read your blogs now i am thinking ,it was a wrong investment.

1- Can i surrender this policy now ?
2- If i will surrender the policy,how much amount will get ?
3-If i will surrender,it will loss for me for future ?
4- if i will close the policy and invest in other(please guide for a plan) it is better for financial goal ?

Dear Jitendra,
You can take tough decision to make it lapse.
Else pay for 3 years and surrender it. Do note that if you surrender before 5 years, the Surrender value amount should be included to your taxable income in that financial year.
Read my article – How to get rid off bad insurance?

Yes, it is advisable to invest in equity mutual funds to achieve your long term goals. Also, do not postpone taking a term plan.

I have read your article and there is mentioned – after 3 year you can stop to pay the premium and this policy will be automatically convert to REDUCED PAID UP policy.In that case only sum assured will be reduced and i will get the vested bonus(Upto 3 year premium) during maturity. Hope so this option will be good for me.It is better than totally loss the money.

Is it applicable for LIC Jeevan Anand ,Plan 149 ?

If i will surrender after 3 year,can i get the vested bonus ?

If i will take a online insurance from LIC/ICICI pru life,which one is better ?

Dear Jitendra..suggest you to download a sample proposal form and go through it. Revert to me if you need any clarification.
You need to disclose all your personal details,income,health /medical history, dependent details,existing life insurance policy details etc.,

Really wonderful explanation with sample goals for people who are zero (like me) in their finance planning. Great work and keep it up. Started reading daily one post/day to get awareness on financial things.

Hi,
Do you have any writings regarding sample investment paln for a mid age (32-35) person.
Example – Age 32-35
Married 1-2 years
wife non working
No children (plan to have with in 1-2 yrs)
No liability like home loan etc
working – private sector
Sal – 50 th.
Monthly expense – 20 th

How mush one should invest with this folio ..
health insurence
child education
emergency (like Job Less)
retirement planning (MF/PPF/NPS) – having PPF (full invested for last 7 yrs)
short term (5-6) / Mid term (8-10 yrs) long term (15-20) investment

Dear Sanchit,
I believe that the fees are directly dependent on the quality of service, availability of value added services, availability of various investment options etc., Go ahead with any Demat account with which you are comfortable with. (ICICI Direct is a bit costly one). I prefer to open a demat account with an entity which also has a banking set up.
You do not need a demat account to invest in mutual funds or sell the units that you have purchased.
I do not have experience with Axis & Anand Rathi. (You may check out fundsindia.com, sharekhan or kotak securities)

Chandra – If you want to track your financial investments then suggest you to create a portfolio on http://www.moneycontrol.com or economictimes website. You can add shares,mutual funds,ULIPs,fixed deposits etc., to the portfolio.

Nice Post Sree. This way of goal based planning helps to achieve the goals and at the same time saves us from mindlessly chasing money and loosing balance in life. It brings order and financial peacefulness.

I appreciate your effort to educate common investors through simple presentation on common topics like this. Financial Planning and investment explained very nicely here and it is up to the point. Please keep it up.